SGO Results and Causes

The fiscal year has ended for the SGO program. As of June 30, donors across the Indiana supported SGO scholarships with over $21 million in donations resulting in nearly $11 million in SGO credits awarded to Indiana residents.

This is a reason to celebrate! But wait, most SGO organizations are not dancing in the streets. Why? Because last fiscal year ending June 30, 2018, there were over $12 million in credits awarded to Indiana donors. Giving appeared to have gone down between the 2017-18 and 2018-19 fiscal years. Indeed, our Lutheran SGO of Indiana raised about $500,000 less in donations this past year.

What happened?

After looking at overall giving data in America for 2018, allow me to break down what we think is some of the overall reasons for the decline in donations. See below:

Perceived SGO Tax Changes. The IRS announced a change in how donors could use SGO donations as deductions on their federal taxes in August of 2018; any donation before August 27 would not see any changes, but gifts made after August 27 could be subject to these new limitations. As with any change in taxes, donors didn’t know what to do, and some withheld or lowered their donations. Couple this with the pending changes in the overall tax system that loomed starting in 2019, donors and their advisors were wary. In fact, we still are not 100% sure what can and cannot be done. One theory, therefore, is that this ruling hurt SGO giving.

Bunching. To attempt to combat expected changes in the federal tax system, some donors “bunched” their year-end 2018 giving. By “bunching”, they would make a gift of double or triple the usual gift size to ensure they would be able to itemize their charitable giving on their federal taxes. But since the SGO gift for federal taxes was up in the air (see #1), those same donors utilized a Donor Advised Fund for their giving, not the SGO program. This is another reason suggested for the decline.

The Stock Market. A third option cited is that not only do an increasing number of donors use appreciated stock and mutual funds to fulfill their charitable donations, but stock gains are used as their personal economic health. The stock market was in decline in December of 2018, and those donors who make their charitable decisions in December may have lowered or halted their gifts.

Lack of Urgency. Another theory that I like is a lack of urgency this year. Indiana legislators authorize a set amount of credits every year. Once those credits are out, there are no more donations allowed until the following July 1 when the fiscal year starts over. In the fiscal year 2014-15, the state ran out of credits in early June. We only had to wait a few weeks for the credits to be back. And in FY 2015-16, the credits ran out in February. But then in FY2016-17, the credits ran out in December! With over 6 months of demand for SGO credits unfilled until the start of FY 2017-18, we experienced a “donation deluge” in July of 2018 as donors who normally would have donated between January and June raced to make their SGO gifts in July before they ran out again. These actions most likely boosted our total giving in 2017-18 beyond the norm of what it would have been if we hadn’t run out of credits, and therefore causing a lower comparison in dollars raised between the two years.

Its a Blip. The other possibility is that there is just no “usual” in the Indiana SGO world. Especially since every SGO organization appears to be affected evenly. There are just too many factors that can affect our results since the SGO year spans two ½ calendar years. All we can do is promote the benefits to our donors and make it as convenient as possible to support scholarships with online giving, monthly auto giving, gifts of stock, gifts of grain, Paypal, and now we added ApplePay to the mix.

At least that is how we see things. What additional ideas would you add to these 5? Contact me at info@lutheransgo.org.